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Question 1

What is an advantage of Owner’s Capital?

Answer 1

Full control over business decisions

Owner’s Capital allows the owner to make all strategic decisions without external interference.

Question 2

What is a disadvantage of Owner’s Capital?

Answer 2

Limited funds may restrict growth

Owner’s Capital can lead to financial constraints that hinder business expansion.

Question 3

What is another disadvantage of Owner’s Capital?

Answer 3

Personal financial risk if the business fails

The owner’s personal finances are directly at risk with Owner’s Capital.

Question 4

What is an advantage of Loans?

Answer 4

Access to larger amounts of capital

Loans can provide significant funding that may not be available through Owner’s Capital.

Question 5

What is a key feature of Loans?

Answer 5

Fixed repayment schedule allows for budgeting

Loans typically have a structured repayment plan, aiding financial planning.

Question 6

What is a disadvantage of Loans?

Answer 6

Interest costs can add up over time

The total cost of borrowing can be substantial due to interest payments.

Question 7

What is another disadvantage of Loans?

Answer 7

Obligation to repay regardless of business success

Borrowers must fulfill their repayment obligations even if the business does not perform well.

Question 8

What is a key advantage of crowd-funding?

Answer 8

Access to diverse funding sources

Crowd-funding allows entrepreneurs to tap into a wide array of potential investors.

Question 9

How does crowd-funding validate a business idea?

Answer 9

Through public interest

A successful crowd-funding campaign indicates that there is demand for the product or service.

Question 10

What is a disadvantage of crowd-funding?

Answer 10

Requires significant marketing efforts to attract backers

Extensive marketing is necessary to create awareness and interest in the campaign.

Question 11

What happens if a crowd-funding campaign does not reach its funding goal?

Answer 11

Leaving you without capital

Failing to meet the target means that funds are not collected, which can hinder business development.

Question 12

What is a key advantage of mortgages?

Answer 12

Allows for property acquisition without full upfront payment

Mortgages enable individuals to buy homes or properties without needing the total amount in cash.

Question 13

What potential benefit can arise from property acquired through a mortgage?

Answer 13

Potential for property value appreciation

Over time, the value of real estate can increase, benefiting the property owner.

Question 14

What is a disadvantage of obtaining a mortgage?

Answer 14

Long-term financial commitment

Mortgages typically require years of repayment, which can affect financial flexibility.

Question 15

What risk is associated with missing mortgage payments?

Answer 15

Risk of foreclosure

Failure to keep up with payments can lead to losing the property to the lender.

Question 16

What is one advantage of mortgages?

Answer 16

Allows for property acquisition without full upfront payment

This means individuals can buy property without needing the entire purchase price upfront.

Question 17

What is another advantage of mortgages?

Answer 17

Potential for property value appreciation

This refers to the increase in the market value of the property over time.

Question 18

What is a disadvantage of mortgages?

Answer 18

Long-term financial commitment

Mortgages typically require payments over many years, impacting financial flexibility.

Question 19

What is another disadvantage of mortgages?

Answer 19

Risk of foreclosure if payments are missed

Foreclosure occurs when the lender takes possession of the property due to non-payment.

Question 20

What is one advantage of venture capital?

Answer 20

Large capital investment for growth

Venture capital can provide significant funds needed for startups and expanding businesses.

Question 21

What is another advantage of venture capital?

Answer 21

Access to investor expertise and networks

Investors often bring valuable knowledge and connections that can benefit the business.

Question 22

What is a disadvantage of venture capital?

Answer 22

Loss of some control over business decisions

Investors may require input or control to protect their investment.

Question 23

What is another disadvantage of venture capital?

Answer 23

Pressure to achieve high returns quickly

Venture capitalists typically expect rapid growth and returns, which can create stress for entrepreneurs.

Question 24

What is one advantage of debt factoring?

Answer 24

Immediate cash flow from unpaid invoices.

Debt factoring provides businesses with quick access to cash by selling their invoices to a third party.

Question 25

What is another advantage of debt factoring?

Answer 25

Outsourced collection efforts reduce administrative burden.

This allows businesses to focus on their core operations without worrying about collecting unpaid invoices.

Question 26

What is a disadvantage of debt factoring?

Answer 26

Fees can be high, reducing overall profit.

The cost of factoring can eat into the profits that a business would otherwise make from its sales.

Question 27

What is another disadvantage of debt factoring?

Answer 27

May affect customer relationships if not managed well.

Poor handling of collections can lead to dissatisfaction among customers.

Question 28

What is one advantage of hire purchase?

Answer 28

Use of the asset while paying over time.

Businesses can benefit from using an asset immediately while spreading the payment over a period.

Question 29

What is another advantage of hire purchase?

Answer 29

Fixed payments make budgeting easier.

Knowing the exact payment amount helps businesses plan their finances more effectively.

Question 30

What is a disadvantage of hire purchase?

Answer 30

Total cost is usually higher than outright purchase.

The convenience of spreading payments comes at a higher overall cost.

Question 31

What is another disadvantage of hire purchase?

Answer 31

Ownership only transfers after all payments are made.

Until the final payment is made, the buyer does not own the asset.